Assignment:
Aggregate Demand and Supply And Classicists
1) List the determinants of aggregate demand, by component.
2) List the determinants of short-run aggregate supply.
3) Draw aggregate demand, aggregate short run supply and aggregate long run supply in long run equilibrium. What is the unemployment level? Be sure to show equilibrium and label everything.
4) Draw what happens in the economy in the short run when interest rates fall.
a. What components of GDP change-how and why?
b. How does aggregate demand and/or supply change? What type of gap is the economy in?
c. What is the impact on price, real GDP and unemployment?
5) Draw and explain what happens in the long run as a result of 4). Explain what happens to the price level, unemployment and real GDP in the long run and why. Be sure to show all the dynamics.
6) Draw what happens in the economy in the short run when the dollar appreciates.
a. What components of GDP change-how and why?
b. How does aggregate demand and/or supply change? What type of gap is the economy in?
c. What is the impact on price, real GDP and unemployment?
7) Draw and explain what happens in the long run as a result of 6). Explain what happens to the price level, unemployment and real GDP in the long run and why. Be sure to show all the dynamics.
8) Draw and explain what happens to the economy if new deposits of coal are discovered in the Rocky Mountains. Explain what happens to the price level and real GDP.